Channel Islands retailers 'can get around LVCR closure'

As Channel Islands politicians count the cost of the UK Government's decision
to scrap tax relief on goods imported from the crown dependencies, a source
claims firms are searching for yet another loophole.

A report in International Tax Review(ITR)alleges that an unnamed Guernsey-based retailer is now sending goods via Germany to customers in the UK to avoid being taxed on small goods.

Low Value Consignment Relief (LVCR) was introduced in 1984 with the aim of minimising administration costs for EU member states, allowing Channel Islands firms to offer cut-price small items such as CDs and DVDs. The decision to cut LVCR in last month’s Budget means that hundreds of workers in Jersey and Guernsey are facing redundancy from firms that previously thrived off offering lower prices than their UK-based counterparts.

Jersey Deputy Geoff Southern wants to know what the latest estimates are for unemployment, redundancy payments, income support costs and lost social security contributions. Social security minister Francis Le Gresley is being asked to produce the figures at next week's States sitting.

But a source told Salman Shaheen at ITR that a well-known Guernsey-based retailer has revealed how his company is going to attempt to get around the tightening of the loophole – by shipping via Germany.

“From what I can see, Germany should not allow LVCR on the items brought in by container addressed to UK customers as it would not be the country of ‘final importation’, which is the trigger for LVCR as per the legislation,” said Richard Allen, a UK-based music trader who campaigned for an end to LVCR.

He believes that there is a memorandum of understanding (MOU) between Germany and the Channel Islands, which means Germany allows the islands to collect tax for them in return for expediting the goods through customs. “This is, of course, intended for goods being sent to German customers from the Channel Islands,” Mr Allen said. “Shipping items via Germany destined for the UK is avoiding VAT and creating a false postal audit trail.”

ITR says that it has spoken to a postal expert who claims that Jersey Post is privy to the scheme, and is planning to have discussions with its customers about how to take advantage of it. Richard Murphy, ofTax Research LLP, has made similar allegations on his blog.

But Jersey Post denies any involvement and says a written judgement of the Judicial Review of the UK’s amended LVCR legislation in March absolves Channel Islands traders of any accusations of abuse.

“Jersey Post does not normally comment on rumours but on this occasion is happy to confirm that it is not aware of any of its customers posting goods to the UK via Belgium or Germany to obtain the benefit of LVCR which, since April 1 2012, has been denied to businesses operating in the Channel Islands,” a Jersey Post spokesperson said.